A #1 million reorganisation of Birmingham Social Services stalled because managers were given inadequate financial training and were not instructed to keep within budget limits, an inquiry has found.
Council leaders decided in April 2004 to set up four devolved area social services teams covering the whole of Birmingham, in response to severe Government criticism about the failure of caring services in the city.
But five months after the new set-up came into existence, with four area directors and support staff, the social services budget was heading for a #27 million overspend.
An investigation by the social care scrutiny committee uncovered the lack of a "robust business approach". Proper financial plans were not in place and there were unsure systems for controlling expenditure.
Len Clark, chairman of the scrutiny committee, blamed the council's former Labour administration which he said rushed through the reorganisation before putting in place key management changes.
Labour opposition leader Sir Albert Bore last month claimed that the overspend was nothing to do with reorganisation. It had occurred because the council's Conservative-Liberal Democrat coalition had "taken its eye off the ball" and failed to keep spending in check.
However, Coun Clark (Con Quinton) said Labour's failure to appoint to key financial posts during the first few months of reorganisation was a fatal mistake that led to the overspend.
Coun Clark said: "Sufficient regard was not afforded to the organisational fragility evident at senior management level within the department when deciding on the timescale and schedule of implementation.
"Prospects for successful change would have been better if the plans and programme had been adjusted to allow for key management personnel to be appointed to oversee and direct the change.
"It also became evident during the review that important information and financial management systems had not been fully developed and tested.
"A key lesson has emerged for the council. Fundamental organisation should not be implemented without a comprehensive risk assessment, particularly in complex and acutely sensitive services such as social care."
Operational teams in the four social care teams were not given a clear performance framework in which to work, the committee found. The absence of such plans was seen to be a major obstacle to sound budget delegation.
The committee's report concluded: "The financial management frameworks the council put in place have not been effective. Underlying systems and processes need to underpin these arrangements to strengthen the financial management.
"Adequate financial arrangements should be put in place to manage the transition from one organisational model to another. The #1 million of one-off resources proved to be inadequate and unusable within the envisaged reorganisation timescale.
"Changes need to be made to the management arrangements, ensuring all budget holders have the relevant skills to carry out their financial management responsibilities and the application of these skills should be a key feature of the performance management arrangements through regular supervision."